STATE OF NEW YORK
INSURANCE DEPARTMENT25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on March 18,
2003, representing the position of the New York State Department.

RE: Group Health Insurance, Continuation and Conversion Requirements.

Question Presented:

When, because continuation is not available pursuant to the
Consolidated Omnibus Budget Reconciliation Act (COBRA), Pub. Law No. 99-272 (1985), New
York State continuation requirements become applicable, for how long must continuation
benefits be provided?

Conclusion:

Pursuant to New York Insurance Law §§ 3221(m) (McKinney 2000 and 2003
Supplement) and 4305(e) (McKinney 2000 and 2003 Supplement), the maximum period of
continuation benefits for a former employee is 18 months.

Facts:

Because this was a general inquiry, no facts were presented.

Analysis:

Under the provisions of the Employee Retirement Income Security Act
(ERISA), 29 U.S.C.A. § 1001 et seq. (West 1999), primary regulation of employee
welfare benefit plans is by the United States Department of Labor. Health benefits are
encompassed within the definition of an employee welfare benefit plan, as set forth in 29
U.S.C.A. § 1002(1) (West 1999). A continuation requirement for employer sponsored health
insurance is mandated by COBRA. The continuation requirements of COBRA have been codified
in ERISA at 29 U.S.C.A. § 1161 et seq. (West 1999).

In accordance with COBRA, employers with more than 20 employees must
provide continuation coverage. This requirement is found in 29 U.S.C.A. § 1161 (West
1999). The required continuation coverage is set forth in 29 U.S.C.A. §1162 (West 1999).
COBRA defines a qualifying event at 29 U.S.C.A. § 1163 (West 1999).

New York Insurance Law § 3221(m), governing policies issued by
commercial insurers, and 4305(e), governing contracts issued by not-for-profit
corporations an all Health Maintenance Organizations, provide, in pertinent part:

A group policy providing hospital, surgical or medical expense
insurance for other than accident only shall provide that if all or any portion of the
insurance on an employee or member insured under the policy ceases because of termination
of employment or membership in the class or classes eligible for coverage under the
policy, such employee or member shall be entitled without evidence of insurability upon
application to continue his hospital, surgical or medical expense insurance for himself or
herself and his or her eligible dependents, subject to all of the group policy's terms and
conditions applicable to those forms of benefits and to the following conditions:

(1) Continuation shall cease on the date which the employee, member or
dependant first becomes, after the date of election: (A) entitled to coverage under title
XVIII of the United States Social Security Act (Medicare) . . . or (B) covered as an
employee, member or dependent by any other insured or uninsured arrangement which provides
hospital, surgical or medical coverage for individuals in a group which does not contain
any exclusion or limitation with respect to any pre-existing condition of such employee,
member or dependent, except the group insurance policy conversion option of this section
shall not be considered as such an arrangement under which an employee, member or
dependent could become covered.

(2) (A) An employee or member who wishes continuation of coverage must
request such continuation in writing within the sixty day period following the later of:
(i) the date of such termination; or (ii) the date the employee is sent notice by first
class mail of the right of continuation by the group policyholder. . . .

(3) An employee or member electing continuation must pay to the group
policyholder or his employer, but not more frequently than on a monthly basis in advance,
the amount of the required premium payment, but not more than one hundred two percent of
the group rate for the benefits being continued under the group policy on the due date of
each payment. The employee's or member's written election of continuation, together with
the first premium payment required to establish premium payment on a monthly basis in
advance, must be given to the policyholder or employer within sixty days of the date the
employee's or member's benefits would otherwise terminate.

(4) Subject to paragraph one of this subsection, continuation of
benefits under the group policy for any person shall terminate at the first to occur of
the following: (A) The date eighteen months after the date the employee's or member's
benefits under the policy wouldotherwise have terminated because of termination of
employment ormembership; or (B) The end of the period for which premium
payments were made, if the employee or member fails to make timely payment of a required
premium payment; or (C) In the case of an eligible dependent of an employee or member, the
date thirty-six months after the date such person's benefits under the policy would
otherwise have terminated . . .or (D) In the case of an employee or member who is
determined . . . to have been disabled at the time of termination of employment or
membership or at any time during the first sixty days of continuation of coverage, the
date twenty-nine months after the date the employee's or member's benefits under the
policy would otherwise have terminated because of termination of employment or membership
. . . or (E) The date on which the group policy is terminated or, in the case of an
employee, the date his employer terminates participation under the group policy. . . .

. . .

(6) This subsection shall not be applicable where a continuation
benefit is available to the employee or member pursuant to Chapter 18 of the Employee
Retirement Income Security Act or Chapter 6A of the Public Health Service Act. (emphasis
added).

In addition to continuation benefits, New York State also requires a
conversion benefit, New York Insurance Law §§ 3221(e) and 4305(d), which is operative
upon the inapplicability of the continuation benefit or the exhaustion of that benefit.
Those sections of the Insurance Law provide in pertinent part:

A group contract issued pursuant to this section shall contain a
provision to the effect that in case of a termination of coverage under such contract of
any member of the group because of (I) termination for any reason whatsoever of his
employment or membership, if he has been covered under the group contract for at least
three months, or (II) termination for any reason whatsoever of the group contract itself
unless the group contractholder has replaced the group contract with similar and
continuous coverage for the same group, whether insured or self-insured, he shall be
entitled to have issued to him by the corporation, without evidence of insurability, upon
application therefor and payment of the first premium made to the corporation within
forty-five days after termination of the coverage for at least three months, . . . he
shall be entitled to have issued to him by the corporation, without evidence of
insurability, upon application therefor and payment of the first premium made to the
corporation within forty-five days after termination of the coverage, an individual direct
payment contract, covering such member and his eligible dependents who were covered by the
group contract, which provides coverage most nearly comparable to the type of coverage
under the group contract, which coverage shall be no less than the minimum standards for
basic hospital, basic medical, or major medical as provided for in insurance department
regulation . . . .

For further information you may contact Principal Attorney Alan Rachlin
at the New York City Office.